Mid-Market Housing to Redefine the Dubai Real Estate Market

Segment Critical to the Sustainable Growth of the Industry and Wider Economy

Dubai, 3 November 2014 – According to a report issued today by Colliers International, a global leader in commercial real estate services, evidence suggests that an affordability gap exists in the current Dubai housing market. Colliers International’s report, “Addressing the Housing Gap” reveals a mismatch between the demand for and supply of appropriate mid-market property, highlighting the social and economic benefit of creating a diverse real estate market that meets the needs of all segments of society.

Ian Albert, Regional Director at Colliers International explained: “When we talk about affordable housing in Dubai we are not referring to low-income housing, but rather housing that is affordable for a household in relation to its income. What this means in the Dubai market is mid-market properties that are suitable for young working families or professionals. Owing to the recent growth in rental and sales prices in Dubai, this market segment has chosen to live in neighbouring emirates such as Sharjah and Ajman where greater options are available to them. This is not only a missed opportunity for Dubai developers who should be looking to capture this sizeable market by creating affordable communities that cater to its needs, but it also directly affects the economy as productivity levels are lowered when a large percentage of the workforce suffers from a long commute.”

The study reveals that 50% of Dubai households earn between AED 9,000 – 15,000 per month. Following internationally accepted standards of what a household can “afford” to spend every month on accommodation, this limits rental or mortgage repayments to AED 32,500- 54,000 per annum.

Despite the size of this market, Colliers International research points to not only the lack of housing at this price level but also the lack appropriate housing, with households in this income bracket restricted to studios or one bedroom units in International City, Deira, Al Qusais and Al Nahda.

“Although the rate of growth in the sales market has slowed, the average 2 or 3 bedroom unit in Dubai is still beyond the reach of most working families. With home ownership no longer an option, these families have been pushed towards the rental market where prices remain high. This represents significant challenges for Dubai. As the cost of living and raising a family becomes untenable for your average family, at best they will look to a neighbouring emirate for accommodation and schooling, and at worst they will look to more attractive, affordable countries in the gulf or further afield,” continued Albert.

The report details the substantial net gains to be made by developing affordable communities as part of creating a layered economy, with each income bracket contributing towards the overall development of the economy and its real estate market. It also asserts that when developed effectively, affordable housing can provide high returns for investors; significant rental increases were witnessed in more affordable locations in Dubai and community facilities, such as healthcare and leisure services, can increase the developer’s overall returns on a mid-market housing project.

“Access to affordable housing is not an issue that Dubai alone faces. Every major city in the world faces the same challenge. It offers huge potential, however, to be achieved it is critical that developers are provided access to well-located and serviced land. Only then will we see a policy for the development of mid-market housing come to fruition in Dubai,” concluded Albert.